Jobless Claims in U.S. Fall to Lowest Level in Five Years

Applications for unemployment insurance payments declined by 19,000 to 326,000 in the week ended July 27, the fewest since January 2008, from a revised 345,000 the prior week, the Labor Department reported today in Washington. Photographer: M. Spencer Green/AP Photo

Aug. 1 (Bloomberg) -- Claims for jobless benefits
unexpectedly dropped to the lowest level in more than five
years, extending swings typical for the month of July.

Applications for unemployment insurance payments declined
by 19,000 to 326,000 in the week ended July 27, the fewest since
January 2008, from a revised 345,000 the prior week, the Labor
Department reported today in Washington. The median forecast of
50 economists surveyed by Bloomberg called for 345,000. A
government analyst said no states were estimated, and the data
were still being influenced by the auto plant shutdowns that
play havoc with the figures at this time of year.

Businesses have been operating with tight workforces as
they wait for signs of a sustained pickup in consumer demand. A
slowdown in firings might signal that employers are becoming
more confident in the recovery and preparing to expand payrolls,
which would encourage household spending, the biggest part of
the economy.

“It’s a stronger labor market than anybody thought we’d be
seeing this time of year,” said Guy Berger, an economist at RBS
Securities Inc. in Stamford, Connecticut, noting the claims data
are affected by auto plant shutdowns that have occurred on a
smaller scale this year. “We’re talking about continued decent
payroll growth.”

Stock-index futures added to earlier gains after the
report. The contract on the Standard & Poor’s 500 Index maturing
in September climbed 0.8 percent to 1,693.4 at 8:47 a.m. in New
York after a report showed China’s manufacturing unexpectedly
grew in July and investors watched corporate earnings.

Claims estimates in the Bloomberg survey ranged from
333,000 to 365,000. The Labor Department revised the previous
week’s figure to 345,000 from an initially reported 343,000.

Auto Plants

Auto plants often shut down in July to retool for the new
model year, an activity that causes claims data to become more
volatile. Ford Motor Co. idled most of its North American
assembly plants for one week this summer instead of two. Three
of Chrysler Group LLC’s assembly plants and all but one of its
engine and transmission factories will skip a summer shutdown
this year. General Motors Co. hasn’t had a formal summer
shutdown since its 2009 bankruptcy.

“Claims for the entire month of July are pretty much a
waste because of seasonal issues,” Jacob Oubina, senior
economist at RBC Capital Markets LLC in New York, said before
the report. “Volatility spikes seriously in this number in
early to mid-July. We’ll get cleaner information on claims in
the weeks ahead.”

The less-volatile four-week moving average declined to
341,250 last week, a two-month low, from 345,750.

Continuing Benefits

The number of people continuing to collect jobless benefits
dropped by 52,000 to 2.95 million in the week ended July 20.
That doesn’t include the number of Americans receiving extended
benefits under federal programs.

The number of job seekers who’ve exhausted traditional
state benefits and are collecting emergency and extended
payments decreased by about 52,500 to 1.57 million in the week
ended July 13.

The unemployment rate among people eligible for benefits
held at 2.3 percent in the week ended July 20, today’s report
showed.

Forty-five states and territories reported a decline in
claims and seven reported an increase, data that is reported
with a one-week lag.

Employment Forecast

Payrolls rose by 195,000 workers in June, indicating the
U.S. is poised for faster growth as it shakes off the impact of
this year’s tax increases and budget cuts. A Labor Department
report tomorrow may show employment rose by another 185,000 last
month, according to the median estimate of economists surveyed
by Bloomberg. The jobless rate fell to 7.5 percent, matching a
four-year low, from 7.6 percent in June, economists projected.

The Labor Department projected a 13 percent drop in un-adjusted claims for last week, or about 44,000. Instead, there
was a 17.7 percent decrease.

While some companies cut workers, Caterpillar Inc. is
requiring employees to take unpaid leave this year as part of a
strategy to cut costs amid slowing sales. Those “rolling
layoffs” are meant to be temporary, director of investor
relations Mike DeWalt said. The company, in Peoria, Illinois, is
the largest maker of mining and construction machinery, cut its
2013 earnings forecast this week.

“When economic and construction activities begin to
improve in the world, particularly in the U.S. and hopefully,
eventually in Europe, it should be a positive for our
business,” DeWalt said on a July 24 earnings call.